Term
Country-by-country reporting
Mandatory reporting by large multinational groups of revenue, profit, taxes paid, employees and assets in every country where they operate. Tax authorities exchange it, and in the EU part of it must also be published.
Updated
What it means
Country-by-country reporting is a report in which a large multinational group breaks down, for each country, its revenue, profit before tax, tax paid and accrued, headcount, stated capital and tangible assets. It came out of the BEPS project against profit shifting.
The obligation applies to groups with consolidated revenue of at least 750 million euros. The report is usually filed by the parent company in its country of residence, and tax authorities then exchange it automatically, so the Slovak Financial Administration sees the figures for the whole group.
The report does not replace transfer pricing documentation but adds the big picture to it. It shows the tax authority whether profit sits where the group really creates value, which helps it decide which transfer prices to examine in more detail.
How it works in practice
A Slovak subsidiary of a foreign group usually does not file the report itself, but it must notify the Financial Administration which group entity files it and in which country. This notification is often missed because the group handles reporting centrally and the local accountant does not know about it.
The data come from the books of individual companies and from consolidation, so the definitions of revenue and headcount must be the same throughout the group. Differences between local figures and the report are the first thing that prompts questions from the tax authority.
Besides the confidential version for tax authorities, the EU also has public country-by-country reporting, which large groups publish. The global minimum tax builds on the same data and uses the report as a temporary safe harbour for simplified tests.
What to watch out for
If a group reports high profits in a country with no staff or assets, the tax authority will ask whether there is a permanent establishment elsewhere and whether intra-group prices meet the arm's length principle. The figures need a convincing business explanation.
A missed notification or an incomplete report attracts penalties, and because the data travel between countries automatically, a mismatch is found even without a tax audit. The local company should obtain confirmation from the group of who filed the report and when, and keep it with its own records.
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